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Office of the Press Secretary

For Immediate Release March 9, 1994
                            PRESS BRIEFING

                          The Briefing Room

3:20 P.M. EST

SECRETARY REICH: Hello. Members of Congress, I'm sorry to disappoint you, they were going to be here, but they had to do something -- they had to vote; they had to go back and vote. So I'm here. Let me just very briefly summarize the reemployment act -- why we're embarking upon it, the job situation and what we're going to try to do.

As many of you know, the job situation does look brighter. The problem is that record numbers of Americans are stranded between jobs, and part of the reason is corporate downsizing. We have record numbers of people who are being laid off right now. In fact, you have a higher rate of corporate downsizing, higher number of Americans being laid off from big corporations now than you did even in the trough of the recession. But, on top of that, there is defense downsizing. That's necessary, it's inevitable -- the Cold War is over, we've got to help people get new jobs.

A third factor is technological change, which is speeding up. Where I come from, Boston, we used to have a great main-frame computer industry. But times change very rapidly and people have to get new jobs -- that industry has all but gone.

And then, fourth, and finally, international trade -- I want to emphasize international trade is good. It means better jobs, it means more jobs for Americans. But it often does mean change and job change. As we open up foreign markets, those export jobs are 17 percent better -- they pay 17 percent better than nonexport jobs. But we've got to be prepared for them. And a centerpiece of the Clinton economic policy is open up foreign markets and then invest in workers and make sure that workers are able to really get the jobs and get the opportunities that a global market provides.

We have inherited an unemployment system that is premised on an entirely different notion. It's premised on the idea that you need something to tide you over until you get the old job back again, usually after a recession, after a downturn. And that was basically truthful, that was the idea -- that was an appropriate idea -- and the unemployment insurance system worked very well for 40, 45, 50 years. But the old jobs are not coming back.

We're coming out of a recession. Normally when you come out of a recession a lot of people are laid off to get the old jobs back. Even the term "lay-off" implied you're going to get back on. But that's an obsolete term because most Americans now, unlike previous recessions, most Americans are not getting their old jobs back again.

So we have very high levels of long-term unemployment. In fact, right now, about one in five workers who is unemployed is unemployed for more than six months. This is a postwar record. And a big reason, a big part of that long-term unemployment is the difficulty of getting the new job.

So instead of having an unemployment system that is geared to tiding you over until you get the old job back again, the notion is to have a reemployment system that helps you get the next job; that provides some income support but combines income support and one-stop shopping. And the President emphasized this -- one-stop shopping for all kinds of services -- reemployment services; services like job search assistance, helping you get the next job. That has been shown to be enormously important. A lot of people who lose their job just have not had to find a new job.

How do you find a new job? Job counseling; good information about where there are jobs, what the jobs are, what to train for, what skills you need for those jobs. We want to develop a computerized jobs data bank that does provide that kind of information. It's going to be customer driven. So the first point is one-stop with all of these services.

The second point -- customer driven. A full range of reemployment services, not just training. And some people that characterize this simply as a training or a retraining program, that's not it. It's has a lot more than training. And I want to emphasize that job search assistance and counseling and information and feedback on what works and what doesn't work in terms of where you can find the jobs -- tremendously important.

Number three, the system is driven by real jobs that are out there. There is nothing worse than being trained for a job that doesn't exist. I'm asked all the time: training for what? What jobs? Well, we're seeing out there right now an entire layer of technical jobs that are opening up -- technician jobs opening up for people, many of whom don't have college degrees; laboratory technicians; factory technicians; people who are linking up computers, linking up the robots who are upgrading the robots and computers, who are doing the software and doing the maintenance and doing the repair.

It's not true that factory jobs are disappearing, but they require some skill, some technical skill. Also, technician jobs in sales and service -- service and sales technicians are a great demand now because a lot of equipment that customers buy is complicated. Even cars -- the old automobile mechanic is being replaced by somebody who understands electronics. You look behind the hood and there's a lot of electronics there. It's not just the old mechanical devices. You need skills. And you need these kinds of technician skills. So real jobs, real skills, leading to real jobs are at the centerpiece of this.

And, finally, accountability -- the fourth point the President mentioned. We are going to demand that these one-stop centers and the training programs and anybody else that is providing any services, that they are genuinely accountable, that there is a customer, a kind of consumer report, a feed back on what is the placement rate for individual training programs. What's the success rate? What are the jobs that training programs are actually getting for people? How long do they stay in those jobs? We are not going to fund any training program that is not providing that kind of information, and very strict performance output standards, performance requirements for these one-stop shopping career centers and all of the providers in the system.

Let me stop on that point and answer any questions you have.

Q Can you break up the cost of this over a five-year period and tell us how it's going to be financed?

SECRETARY REICH: Yes. The President is requesting, over the five-year window $13 billion; $11 billion of which would be on the discretionary side, $2 billion of which would be on the mandatory side. The mandatory expenditures would be for extended benefits for people in job training -- if they need more than shortterm job training. One thing we've learned after looking -- in fact, I've spent much of the last year looking at what works and looking at what doesn't work, and what works is longer-term training. Shortterm training is not as good. Sometimes it does work, but long-term training -- many people if they are assessed and they need that longterm training, they need the extended benefits to get it.

Q But would the training be a prerequisite to getting the benefits?

SECRETARY REICH: That's right. They have to be in a program. In fact, by week five of getting unemployment insurance -- by week five you will be assessed as to whether you're likely to get your old job back again. If you're not likely to get your old job back again, then you are going to get a whole battery of reemployment services if you're a dislocated worker, and you can get training. But you've got to be in training for the next job if you want extended benefits.

I want to give you some background on this because it's very, very important. Last year the federal government spent $14 billion on emergency extended benefits. That's not helping people get the next job, that's just keeping people in place. And that is on top of the $22 billion spent by the federal and state governments on the regular unemployment insurance system. In other words, $36 billion last year was spent on simply helping people until, hopefully, they hoped they would get the old job back again. But they're not getting the old jobs back again. So that's why we want to make a much sleeker, more targeted program to the people who need help getting the next job and get them extended benefit for that next job.

Q Given the fact that there are priorities on welfare and health care reform, what is the window of opportunity to get this through Congress? And do you have the votes that you need to get this passed, or what sort of opposition do you think this will face?

SECRETARY REICH: Well, I haven't counted noses, but I can tell you that when I talked to the business community and the labor community, and when I talked to Democrats and a lot of Republicans, what I hear is the same refrain: My constituents, many of them are having trouble getting new jobs. We've got to reform the present system. The present system is broken. And let's get on with it. I think there's very, very strong support for this.

Q And the window of opportunity --

SECRETARY REICH: I think the window of opportunity, hopefully, we're going to do it this spring. I see a lot of opportunity and a lot of -- I see a lot of momentum in this direction.

Q Mr. Secretary, on the cost issue, how specifically -- what federal programs are you -- on the cost, what federal programs are you going to cut and how are you going to pay for this on the federal level? Secondly, during the first 13 weeks of unemployment, the states are responsible for that. Are there additional mandates on the states, things that they have to do, and who is going to fund that?

SECRETARY REICH: Okay, first question, the President is requesting, as I said, $11 billion on the discretionary side; $2

billion on the mandatory side through the five-year -- we made the budgetary presentation; that's in the next five years. And the discretionary side, those additional funds come from cuts elsewhere. And the President has specified that cuts all over government, that is it's under the budget caps and that's the law. And we are continuing to -- that domestic discretionary budget, as you know, there's a hard freeze on that and that means that that money has to come from elsewhere.

On the mandatory side, that $2 billion, that comes from offsets which include trade adjustment assistance; the NAFTA bridge program, which was going to be phased out as soon as we have this comprehensive program in place; and also a continuation -- that is, an extension of a small two-tenths of one percent surcharge on unemployment insurance that's been in effect since 1977. It comes to $14 a year per worker. And business has already been paying it since 1977. The irony is that it hasn't been used for workers and for extended benefits; it's been used for a lot of other things. We want to really focus that on what it's intended to be used for, and that is for American workers.

Q If you could finish the second part of the question, the 13 weeks that the states have to fund.

SECRETARY REICH: Yes. The state -- the normal federalstate unemployment insurance program, typically 26 weeks, and that would continue. The big difference is that states would have to identify workers early on who are unlikely to get their old jobs back again. And the states, with federal assistance, with federal money, would create these one-stop centers.

Now, states would also have the option of going even one step further and creating comprehensive one-stop career centers in which it wasn't just for dislocated workers, it was for any worker who needed some additional help, including vocational, education. Every one of these programs could be handled through the same onestop center.

Our notion is that not only do we want to consolidate the dislocated worker programs, but if you're an individual worker or potential worker, you don't care what the funding stream is. You want one door, one convenient location where you can get it all. And that's what we're aiming for.

Q What will you do about the training centers? Will you do on-the-job training in plants or will you have to establish centers? Will you use some of the military bases, or what?

SECRETARY REICH: On-the-job training has proved to be very successful and I expect that a lot of these centers are going to be referring people to on-the-job training. The beauty of this proposal, particularly with regard to the one-stop career centers, is that states and locales can, if they wish, charter any organization -- not-for-profit, it could be a military base, it could be a community college -- to provide this one-stop career center services.

Community colleges, by the way -- and again, I don't know how much you know about what's going on out there with regard to -- I didn't know a year ago -- community colleges are the great unsung heroes of much of America in terms of educating and training and getting them jobs. Half of the students in the evenings in most community colleges are adults who are moving from job to job. But this system actually gives them the resources they need and also creates a system of one-stop shopping and accountability so that Americans have more help with this terrible passageway that many people have to endure.

Q Do you intend to attach the .2 percent payroll tax to GATT implementation legislation? Is that the vehicle you intend to use?

SECRETARY REICH: We haven't really decided in terms of exactly what legislative vehicle would be best for that extension. Again, I want to make sure you all understand -- this is a $14 a year per worker that businesses are already paying. But beginning -- and up until 1998, it's going through all kinds of other things under the budget rules we have. The hope is to fence that in or anchor it, beginning in 1999, so it goes for the purpose for which it was originally intended -- that is to help workers, particularly -- only workers that are in training -- with extended benefits.

Q Why weren't there any Republicans present today? Did you invite any to come?

SECRETARY REICH: Republicans are supportive of this legislation, and I expect that they are going to be joining us. Hopefully, it's going to be a bipartisan piece of legislation. I think many Republicans are now looking over the legislation. We sent it up to the Hill and many of the offices very recently. I've talked with many Republicans who are very interested, and I'm going to continue to talk with them. I hope that this is strongly bipartisan, and it should be bipartisan because everybody has an interest in getting people new jobs more quickly.

Q Are these centers going to be privately run, or are they going to be done by states and localities?

SECRETARY REICH: The states will have an option, with regard to the one-stop career centers, the states will have an option whether they only charter a consortium, which includes the employment service and all of the other providers; or they go beyond that and charter private and not-for-profit and any organizations that feel that they can do it. But, again, my most important point here with regard to accountability -- there will be very strict performance standards and with states that are opting for competition, we are going to put the providers essentially in competition with one another.

Q So it's up to the states to charter a nonprofit business?

SECRETARY REICH: States could charter, yes, not-forprofit community colleges or a variety of entities under, again, that one-stop career center approach; which is a very ambitious approach. And we're going to encourage states to do that. A lot of people say to me, well, how can you actually consolidate and get all these programs together? Well, number one, we're going to consolidate all of the dislocated worker programs right away. And number two, with regard to a lot of the other programs that are out there for training workers, the best way to consolidate is both carrots and sticks. That is, we say to states, you qualify for some of this additional money to establish one-stop career centers for all your workers. But in order to qualify you've got put together all of these funding streams.

Q What is the relationship between unveiling this today, this jobs program, and the G-7 jobs conference next week?

SECRETARY REICH: The relationship, to the extent that there is a relationship -- and there is a relationship -- is that the G-7 jobs conference is about the jobs problem facing every advanced economy. It takes different forms in different economies. In Europe, for example, it takes the form of double-digit unemployment. And Europe has faced mounting unemployment for 15 years. The United States, it takes a slightly different form. We certainly have unemployment. We don't have quite the unemployment problem of Europe. But we have a problem of declining real incomes for many -- in fact, a majority of our workers. Those without college degrees, in particular, have seen their incomes adjusted for inflation, continuously declined over the past 15 years.

The question is, do advanced nations have to choose -- make that -- choice between on the one hand more jobs, but not very good jobs; in fact, jobs that are getting worse; and a wider gap between the college educated and the non college. Or on the other hand, better jobs -- European jobs, those who have them, have seen their wages increase, but fewer of them. I don't think we have to make that choice. And the question is, can we learn from each other.

The Europeans do a very good job of bringing the bottom two-thirds of their work force up to a high minimal level of competence through their education and training and apprenticeship programs. But, arguably, the European labor market system is less flexible, less dynamic, less resilient than the American system. So their investments in human capital, our mobility and our resilience, together, may be part of the answer.

Q? Secretary Reich, even with this program, what are the savings over five years over what you would have spent on emergency extended benefits, savings throughout all the unemploymentrelated spending?

SECRETARY REICH: Well, if you consider that last year we spent $14 billion on emergency extended unemployment insurance, we're not going to spend that this year. We're not going back for an additional extension. So, that's saving number one. Number two, we know from pilot projects we've undertaken -- one notable pilot project in New Jersey, we had 2,500 to 3,000 people and a control group of 2,500 to 3,000 people just to test that in fact this was the case. When we got the people who showed up for unemployment insurance, we identified very early the people who were unlikely to get their old jobs back, got them reemployment services very early, including good information about where the next jobs were, we shrinked the duration of unemployment. And that was a big saving.

In fact, even if you take a week off of the average unemployment duration, you are not only saving all of that unemployment insurance, but you are also getting people back into the productive economy. You are getting productive people. They are taxpayers. You're making substantial savings. Now, we are not making any claims about those kinds of savings in this bill. We are not making claims that, in fact, the unemployment insurance is going to save such and such amounts of money in this bill. We want to make sure that any American who loses a job has easy access to reemployment services that will get him or her to the next job. And that's in the interest of all of us.

Q The $11 billion in discretionary cuts that will have to made elsewhere -- have you identified any of those areas?

SECRETARY REICH: Yes, the President in the '95 budget has begun to identify those. There have been hundreds of program cuts. In fact, in the '95 budget, just sent up there, the President has -- in fact, one of saying of this would be that in 1993 we had a little bit over $500 million to help dislocated workers. In 1995 the President is proposing $1.5 billion to help dislocated workers. And he has been very specific about where the program cuts will come from around the government to finance that, as he has for his other investments.

Well, I can just give -- look at the '95 budget and see where the cuts are. I mean, there have been -- there are cuts all over the budget. But let me specify this -- the President is asking for major increases. His investment budget in 1995 is focused on -- and I'm going to use a very cold-blooded term -- human capital: education, Headstart, the Reemployment Act. Why? Because he feels very strongly that this is the key asset of the nation. Yes, we have to continue to reduce the budget deficit. Yes, we have to continue to get our fiscal house in order. But we can't scrimp on investing in people, because in a modern economy, this is the asset that is most important.

Q Are you satisfied that a year and a half is long enough for extended retraining, or is that a budget-driven figure?

SECRETARY REICH: Most of the data we have shows that a year and a half is about right. Some people may need two years. We can't afford two years, but there will be an opportunity for people to get income-contingent loans for the remainder if they need it.

Q When do you expect the first all-in-one center to be up and running?

SECRETARY REICH: Well, hopefully, assuming that the legislation passes this spring, we could do it as soon as July of 1995. Let me also add that as I've traveled around the country, I have dropped in on five or six places that are already doing it. Now, they're doing it notwithstanding the federal government, not because of federal encouragement. That is, they are taking bits and pieces of federal program and they're twisting like pretzels and they're putting things together. And they have had a very difficult time doing it, but they're already doing it.

And I've seen those programs in Hamden, Connecticut, and in Louisville, Kentucky -- Louisville Joblinks. I've seen it in Sunnyvale, California, the President and Vice President and I were out there. There is a lot of evidence out there that these kinds of centers work; that they're terribly important for helping people get new jobs. I would like to see more of them. So instead of being a hindrance, the federal government is actually going to be a facilitator, a nurturer. We are going to try to give much more impetus behind creating these kinds of things.

Q Again, there is no question that we need more jobs, more Americans added to the economy, the well being. And forgive the nature of this, but can we withstand 200,000 increase on a monthly basis in payrolls without exacerbating inflation? Is that something that --

SECRETARY REICH: Can we withstand a 200,000 increase in payrolls without exacerbating inflation? Well, let me just say that we are far from the rate of unemployment that, in my view, would ignite inflation. We have 8.5 million people who are unemployed, we have 5.5 million people who are involuntary working part-time, would rather be working full-time. We have at least a million who are too discouraged to look for work, and I'm not even counting the people that don't even show on the unemployment data. These are people mostly in central cities who are nonemployed.

In fact, roughly -- roughly -- one out of every eight American males is not working, and that's a 12 percent rate of unemployment, if you count central cities and you count all of our nonworkers.

Q What about females?

SECRETARY REICH: Well, actually, females are in slightly better shape. But we still -- at least females who are seeking work are in better shape. The difficulty with the data --and I don't want to make this too technical -- the difficulty with the data, as you know, the CPS, the Bureau of Labor statistics just began -- began a revised series which would actually get at the number of women who are looking for work. We have not had very good data series on that in the past. In fact, the sample has been quite biased against women.

Q But the jobs that the women have pay less, right?

SECRETARY REICH: The jobs that the women have do pay less. Although college-educated women are doing better and better, the jobs that women have do pay less.

Thank you.

END3:45 P.M. EST